On older bikes the sprocket cluster and ratchet mechanism are combined, whereas on newer bikes the hub and ratchet mechanism are combined.

As with "clipless pedals", the terminology is not chosen to actually make things clear, but simply to avoid reusing terms that were previously used in a different sense. So cluster+ratchet = "freewheel", leaving only the hub, while ratchet+hub = "freehub", leaving the cluster = "cassette".